In this paper, we study a large trader’s price manipulation in asset markets, which is viable because market considers it possible for the large trader to have information. At the beginning of each period, the large trader will receive a perfect signal about the unknown value of the asset robabilistically. All the other market participants do not know whether the large trader received a signal, although they know that it was possible for him to have received a signal. It will be shown that, in addition to the simplest equilibria where the large trader trade if and only if he has
information, there are two other equilibria where the large trader trades even when he does not have information. In order to make his attempts to manipulate the prices successful, he sometimes sells the asset even if he has
a good information, and buys it even with a bad information. We will show that stock price manipulation will be more likely to be observed when the large trader has information less likely. We will also show that the price will be more volatile when there is price manipulation.
